I’m a tax lawyer based in San Francisco (www.WoodLLP.com), but I handle tax matters everywhere. I enjoy untangling a tax mess from the past, disputing taxes with the government or planning taxes for the future. One of my specialties is advising about lawsuit payments. Whether you’re receiving or paying a legal settlement, you can probably improve your tax position. I write frequently about taxes, from expatriation to sales tax, from selling your company to restitution. I’ve written over 30 tax books, but my best seller is still Taxation of Damage Awards and Settlement Payments. Contact me at wood@WoodLLP.com.

Incredibly, 48 Nations Embrace FATCA To Reveal U.S. Depositors

FATCA is four years old but it is still being ramped up for its big worldwide rollout July 1, 2014. Foreign banks must hand over the details of American account holders with over $50,000 on deposit or face serious repercussions. Institutions that fail to comply could effectively be frozen out of U.S. markets. The institutions may not like it, but they are complying.

And so are virtually all nations, which is an astounding accomplishment for the U.S. Treasury Department. It is now clear that FATCA is a bigger success than anyone could have imagined. With disclosures, prosecutions and summonses, the IRS is getting quicker, better and more complete information than ever. And FATCA will expand it like a fire hose.

(Photo credit: Images_of_Money)

After foreign institutions identify U.S. account holders, FATCA requires the institutions to impose a 30% tax on payments or transfers to any who refuse to step up and get into full U.S. compliance. At first, Foreign financial institutions (FFIs) must report account numbers, balances, names, addresses, and U.S. taxpayer identification numbers. For U.S.-owned foreign entities, they must report the name, address, and U.S. TIN of each substantial U.S. owner.

Although the Republican Party is backing a FATCA repeal resolution, and there is RepealFATCA.com, FATCA is almost surely here to stay. Now, the U.S. Treasury has given foreign financial institutions 10 extra days to register. In addition to extending registration to May 5 from April 25, the U.S. has confirmed that more and more countries are now FATCA compliant. In particular, this is a big relief for financial firms in Brazil, South Korea and South Africa. Conversely, U.S. depositors who have accounts in such countries may now be more nervous.

But far more important that a mere 10 day delay, the U.S. now says it does not need to insist on the immediate signature on all IGAs, Intergovernmental Agreements. Countries that have FATCA agreements “in substance” with the U.S. will be treated as complying with FATCA. In fact, this is so even if the agreements are not finalized by Dec. 31, 2014.

What is the practical impact of this decision? It increases the number of countries that have intergovernmental agreements with the U.S. to 48. That is up from the 26 agreements that are actually signed. Here are the 26 nations so far, with links to their agreements:

Going from 26 to 48 is huge, and a smart move by the U.S. The announcement allows a country’s financial institutions to comply with FATCA via their domestic regulators. Overnight, which nations got added to the prior list of 26?

Australia

Austria

Belgium

Brazil

British Virgin Islands

Croatia

Czech Republic

Estonia

Gibraltar

Jamaica

Kosovo

Latvia

Liechtenstein

Lithuania

New Zealand

Poland

Portugal

Qatar

Slovenia

South Africa

South Korea

Romania

Before the announcement, many foreign businesses were unsure how to comply with FATCA by July 1 if their home countries had not yet signed IGA deals with the United States. Now, there is more certainty. And plainly, the list of countries with IGAs is likely to grow further.

Hey, what about China, Hong Kong, Russia and Singapore? The jury is still out.

You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

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If the nature of the mission was to stop tax evasion the US could have asked foreign governments to share the information of their RESIDENTS investing abroad, not their citizens working abroad. HUGE DIFFERENCE!! FATCA is destroying the lives of ordinary, middle class, law abiding US persons having had to leave the homeland to find work. The US is promising reciprocity yet the Congress has said NO WAY. Although a “right wing” publication this author has done a great job exposing what FATCA really is:http://www.thenewamerican.com/world-news/item/17986-the-dark-road-the-worst-tax-law-you-ve-never-heard-about://

In the US, it is illegal to discrimination against an individual due to their place of birth. Fortunately for the US government, it does not apply its laws outside of US jurisdiction, enabling the US government to honor national origin discrimination and citizenship status discrimination beyond its borders. You are thus correct that America views discrimination against its expat population as being a “bigger success than anyone could have imagined”. America takes great pride in harming its expat population and no nation is more successful in doing so than the US government.

I don’t think the U.S. is actually intending to discriminate against expats, but just has not yet found a way (or perhaps even seen a need) to keep them from being unfairly harmed by the larger efforts to tax evaders. I know it is a fine line, and I too think the U.S. has mostly ignored expat concerns.

There is a way: ask for data on US RESIDENTS with off-shore accounts, not US citizens working abroad. Not having a need to keep US citizens abroad from being unfairly harmed is amoral and a violation of human rights. Does anyone understand just how horrific this law is? There are up to 8 million Us tainted people living abroad. Many will be bankrupted, (not from owing taxes but FBAR filing penalties, something most never knew about) many seniors will lose their entire retirement accounts under PFIC rules, bank accounts and mortgages are being closed, they have become international criminals.

The Dutch Human Rights Court (“College voor de Rechten van de Mens”) ruled last week that a bank (Binckbank/ Alex), that had closed a Dutch-American’s account due to FATCA compliance costs, discriminated against this dual-citizen due to his nationality. The bank appears to have tried to maintain the defense that it was closing “US Person” accounts, not based on nationality, but the court did not accept this Argument and said it was based on the fact that he was a US citizen. To learn more about this case, search on “binckbank alex fatca discriminatie” (articles are in Dutch).

US law writes that individuals may not be treated differently because of their place of birth. Yet, this is exactly what FATCA is doing, treating individuals living abroad differently from other locals because of their place of birth. This means that the US government is knowingly and willingly violating US law. When I called various departments of the US Department of Justice, they all stated that such violations of US law are acceptable since it is being practiced outside of US jurisdiction. Yet, US law also writes that all U.S. citizens are protected from national origin discrimination, regardless of where they live.

That approach has already been tried and failed. Even Mitt Romney declined to file an FBAR and he faced no sanction. It’s much easier to target the banks–that’s the choke point–and that’s exactly what FATCA does. It’s too easy for individual taxpayers to hide their accounts in the shadows but banks by their nature have to operate out in the open.

So, is this a sign of strength of weakness for Treasury to move the goal post yet again (after saying emphatically “No More Delays”) and suddenly deem 22 additional countries as FATCA compliant if they had happened to be in negotiations on capitulating to the FATCA IGA?

Treasury was faced with a lot of FFIs that would NOT have GIINs (The modern ‘Mark of the Beast’) by their imposed deadline and had to do something to keep a financial melt down from happening. “Oh, I got an idea”, says Treasuries Robert Stack, “if any country has contacted us about an IGA or is thinking about an IGA and regardless of whether or NOT their Parliaments will agree to changing their privacy laws and joining America as a “Dragnet Nation”, we will “deem” them compliant. Then the FCC (FATCA Compliance Complex) and FATCA commentators will be amazed at how good we are doing and trumpet it for us as a GREAT SUCCESS” :)

Yup, I agree, pretty smart strategy. It works. Additionally, it pressures the hold outs to hurry up and do the meager steps to be “deemed compliant.” It is a nice extra delay without really saying it is a delay, as they have now until the end of the year to get their ‘U.S. Person’ roundup functioning.

Of course as the IRS Commissioner said, they have no money to process all the data they are going to get, so what a fruitless mission it may be, eh?

As you noted, Russia is NOT on the list, when it has been reported in Russian media that they were in negotiations are eager and willing to sign if they get true reciprocity, but Treasury called off negotiations. It would appear that this is a good way to impose another Ukraine sanction without having to do anything in the way of an official announcement.

Fair point, perhaps it is strength or weakness, glass half empty or full. But however you see it, it has become much bigger (of a success or failure) than many people ever expected. Yes, Russia is an interesting one to watch!

Russia, China, India, Hong Kong, Singapore have not signed on. They seem to have the courage to stand up to extortion. If these countries pull their assets out of the US to avoid the 30% withholding threatened by the US if they don’t sign up the consequences of this endeavor will be high. They don’t seem to be “embracing FATCA” as Mr. Wood believes the other countries have done.

The only bank in my home town does not allow Americans. This is a result of the securities act of 1933, which remains unresolved after 81 yrs. FATCA is like a pimple on your chin or a big cold sore on your mouth—all FATCA does is signal to the world that there is a festering disease inside the USA body of unlaws.

FATCA is one of the most important laws passed by the US Congress in decades. Faced with epidemic tax evasion by persons who wish to benefit from being an American Citizen or the other covered categories, with all the protections and benefits that flow from that status, while externalizing the costs of maintaining the United States on other tax payers.

One need only review the data in three seminal works to understand the full damage of tax evasion and in general the impact of tax evasion onshore. Those three works would be Nicholas Shaxton’s “Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens” and two works by Pulitzer-Prize winning New York Times journalist David Cay Johnson: “Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich–and Cheat Everybody Else” and “Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and StickYou with the Bill)”.

If you are another unpatriotic tax evader who believes it is both morally sound and legally wise to evade taxes, FATCA will give you another think. Secondly, if you think the Republicans in Congress are going to save you–let’s see how that works out for you.

FATCA is here to stay. I will note that Somalia is not yet on this list of compliant countries, so you can always evade taxes by moving there, and I’m certain there are some Somali warlords only too willing to take your deposits.